{"id":1708,"date":"2020-03-25T14:51:58","date_gmt":"2020-03-25T13:51:58","guid":{"rendered":"https:\/\/dev.ostersjostiftelsen.se\/investment-policy-of-the-foundation-for-baltic-and-east-european-studies\/"},"modified":"2020-08-07T09:27:00","modified_gmt":"2020-08-07T07:27:00","slug":"investment-policy-of-the-foundation-for-baltic-and-east-european-studies","status":"publish","type":"page","link":"https:\/\/dev.ostersjostiftelsen.se\/en\/asset-management\/investment-policy-of-the-foundation-for-baltic-and-east-european-studies\/","title":{"rendered":"Investment Policy of the Foundation for Baltic and East European Studies"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><em>Adopted by the Board of the Foundation on 4 June 2020.<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">1. Guidelines for the Foundation\u2019s asset management<\/h2>\n\n\n\n<h4 class=\"wp-block-heading\">1.1. Introduction<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">The Foundation for Baltic and East European Studies (\u00d6stersj\u00f6stiftelsen) was established by the Swedish Government on 23 June 1994. The Foundation\u2019s mission is to support research, doctoral education and academic infrastructure related to the Baltic Sea Region and Eastern Europe at S\u00f6dert\u00f6rn University. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Foundation is led by a Board. Under the Statutes, the Foundation\u2019s entire capital, which from the beginning amounted to SEK 1,270 million, cannot be depleted. The assets must also be managed safely, in such a way as to limit the risks and make use of the scope for a good return.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Board has appointed an investment committee and a research committee. On the Board\u2019s behalf, the investment committee is responsible for the asset management and reports to the Board.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This investment policy was adopted by the Board on 13 December 2016  and is revised annually. If a need arises, the Board can make day-to-day decisions on changes to the investment policy.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">1.2. Purpose of the investment policy<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">This policy document constitutes the framework for conducting the Foundation\u2019s asset management. More specifically, the purpose of the policy is to regulate how, overall, the Foundation\u2019s assets are to be invested, responsibilities divided, management decisions made, and risks and internal control handled. The policy also defines how ethical and environmental issues, and reporting routines, are to be managed.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">1.3. Target return for asset management<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">The Board has set the following asset management targets:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>The Foundation\u2019s assets must be managed so that its return \u2014 on a stable, long-term basis \u2014 can fund research at S\u00f6dert\u00f6rn University. The support for S\u00f6dert\u00f6rn University should be so dimensioned that there is a high likelihood of the original endowment capital retaining its real value intact over time.<\/li><\/ul>\n\n\n\n<ul class=\"wp-block-list\"><li>The Foundation\u2019s capital must be invested so that it provides an annual real return of at least 4.5% on a 10-year time horizon. \u2018Real return\u2019 refers to nominal return \u2014 that is, interest and other direct return plus realised and unrealised value increase, minus annual inflation measured as the change in the consumer price index (CPI).<\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\">1.4. Normal portfolio<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">The deciding factor for whether the Foundation achieves the target return is allocation among various asset classes. The Board therefore adopts a normal portfolio annually, specifying the asset-class distribution. In adopting the normal portfolio, the Foundation must take into account the level of risk in its asset management.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For the current normal portfolio, see section 4.1.<\/p>\n\n\n\n<hr class=\"wp-block-separator is-style-wide\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">2. Responsibilities and powers<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>In matters of asset management, the Board is responsible for:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>compliance with the Foundation\u2019s charter<\/li><li>deciding on investment policy, the normal portfolio and exposure limits <\/li><li>continuously reviewing asset management in terms of set objectives, risk limits and compliance with investment policy<\/li><li>appointing an investment committee, tasked with preparing and deciding on asset management issues, comprising at least two of Board members<\/li><li>ensuring that asset management is conducted with the requisite skill.<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>On the Board\u2019s behalf, the investment committee is responsible for:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>managing the Foundation\u2019s securities portfolio within the framework of the normal portfolio adopted and permitted exposure limits<\/li><li>deciding, within the framework of the investment policy adopted, on purchase and sale of the Foundation\u2019s securities, and giving external and\/or internal managers the detailed instructions that they need to execute the investment policy, or that the committee otherwise deems appropriate<\/li><li>continuously keeping the Board informed of the committee&#8217;s decisions and the results of the asset management, and where necessary proposing to the Board changes in the investment policy adopted<\/li><li>making decisions on selection or, where appropriate, replacement of one or more external managers<\/li><li>making decisions on exemptions from the investment policy when special circumstances so require, and reporting exemptions to the Board immediately.<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>On behalf of the Board, the Investment Director is responsible for:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>ensuring compliance with the investment policy<\/li><li>preparing documentation, such as analyses, asset management reports, follow-ups, etc., for the Board and investment committee<\/li><li>ensuring that financial agreements and transactions take place within the framework of this investment policy<\/li><li>representing the Foundation vis-\u00e0-vis external counterparties in ongoing matters<\/li><li>continuously informing the Board and investment committee, and also the Foundation\u2019s auditors, about activities in the asset management.<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">The investment committee may assign its mandate wholly or partly to asset managers.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Investment Director may delegate the task of representing the Foundation to external counterparties in ongoing individual matters, either to another member of the investment committee or to another employee at the Foundation\u2019s secretariat.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Besides the above provisions on responsibilities, the Investment Director\u2019s mandate includes, between investment committee meetings:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>buying or selling shares up to a net total of SEK 50 million in major companies listed on the Nordic stock exchanges; \u2018major\u2019 means having a market value exceeding SEK 5 billion<\/li><li>buying or selling bonds up to a net total of SEK 15 million; there must be liquidity in the bond \u2014 that is, it must be tradable<\/li><li>deciding on supplementary investment in an existing unlisted holding or a small listed company up to SEK 5 million within the risk limit adopted.<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">\u2018Net\u2019 refers to the sum of purchases and sales. If the Investment Director opts to utilise the above mandate, this must be reported to the investment committee and entered in the minutes at the next meeting.<\/p>\n\n\n\n<hr class=\"wp-block-separator is-style-wide\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">3. Investment philosophy<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Like most other foundations, the Foundation for Baltic and East European Studies takes a permanent stance on its endowment capital, which means that it must be managed so that it, at least, retains its real value indefinitely. Based on this permanent stance and the Foundation\u2019s return requirements, the investments must be permeated by the following fundamental principles:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>The Foundation can invest the capital in three main types of security categories:<\/strong><\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em>Group 1. <\/em><\/strong><em>Stable listed shares and other securities with equity-like risks and returns<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Group 1a<\/strong>. <em>Shares and stock-market indices.<\/em> \u2018Shares\u2019 refers to listed companies with a market value exceeding SEK 5 billion that, over time, have demonstrated stable profitability and are expected to continue to do so. \u2018Stock-market indices\u2019 refers to investments that provide exposure to the performance of a stock-market index. For example, they may be stock-index bonds or futures that can increase or decrease the portfolio\u2019s stock exposure.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Group 1b. <\/strong><em>Securities with equity-like risks and returns.<\/em> These may be property-related assets, high-yield bonds, preference shares with a known return, and aggressive hedge funds and fixed-income funds. It must also be possible to regard this sub-portfolio as having an overall risk level and an expected level of return resembling those of Group 1a, although the return profile may well deviate from the stock market.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em>Group 2. <\/em><\/strong><em>Smaller companies<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2018Smaller companies\u2019 refers to unlisted companies and listed holdings where the Foundation\u2019s shareholding is &gt;3%, and where the total company value does not exceed SEK 5 billion. The difference between unlisted shares in Group 1 and Group 2 is that the risk of the initial individual investment in smaller companies is significantly higher than the risk for Group 1 investments. For Group 2, investing in growth companies is the usual aim.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em>Group 3. <\/em><\/strong><em>Liquidity and defensive fixed-income investments<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2018Liquidity and defensive fixed-income investments\u2019 refers to the assets that need to be available for current payments, as well as to fixed-income investments and hedge funds in which the risks and expected returns are significantly lower than those of the fixed-income securities in Group 1.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>The Foundation\u2019s emphasis should be on Group 1.<\/strong><\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Over time, the Foundation strives to invest a majority of its managed capital in  Group 1 securities. The motivation is that, in the long term, this type of investment provides a significantly higher return than, for example, low-risk bonds. The Foundation\u2019s good solidity and permanent stance on its endowment capital enables it to withstand the asset portfolio\u2019s high volatility without putting the Foundation\u2019s purpose at risk.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Other principles<\/strong><\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">The Foundation strives for risk diversification within each securities category through well-diversified portfolios.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Foundation strives for a low turnover in its portfolio and low management costs, as these have a significant impact on performance in the long term.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Foundation continuously reviews the ethical and environmental aspects of its capital investments.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Foundation works independently in managing its assets and makes its own investment decisions.<\/p>\n\n\n\n<hr class=\"wp-block-separator is-style-wide\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">4. Investment regulations<\/h2>\n\n\n\n<h4 class=\"wp-block-heading\">4.1. Normal portfolio and exposure range<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">The table below shows the Foundation\u2019s current normal portfolio and permissible deviations.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>   <strong>Asset class<\/strong>   <\/td><td><strong>Minimum exposure<\/strong><\/td><td><strong>Normal portfolio<\/strong><\/td><td><strong>Maximum exposure<\/strong><\/td><\/tr><tr><td><strong>Group 1a (Shares)<\/strong><\/td><td>  20%\n  <\/td><td>  <strong>40%<\/strong>\n  <\/td><td>  55%\n  <\/td><\/tr><tr><td><strong>Group 1b (Equity-like risk and return)<\/strong><\/td><td>  20%\n  <\/td><td>  <strong>40%<\/strong>\n  <\/td><td>  &nbsp;50%\n  <\/td><\/tr><tr><td><strong>Group 2 (Smaller companies)<\/strong><\/td><td>  5%\n  <\/td><td>  <strong>10%<\/strong>\n  <\/td><td>  20%\n  <\/td><\/tr><tr><td><strong>Group 3 (Defensive interest-bearing investments)<\/strong><\/td><td>SEK 100 million<\/td><td>  <strong>10%<\/strong>\n  <\/td><td>  40%\n  <\/td><\/tr><tr><td><strong>Total<\/strong><\/td><td>  <strong>&nbsp;<\/strong>\n  <\/td><td>  <strong>100%<\/strong>\n  <\/td><td>  <strong>&nbsp;<\/strong>\n  <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">The normal portfolio is calculated on the basis of exposure, not allocation of market values. Unlike allocation, exposure also gives a picture of any leverage or hedging.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">4.2. Guidelines and risk limits for each category of securities<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">Investments may be made in the following instruments:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Group 1<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em>Swedish and foreign listed shares<\/em><\/strong> <br>\u2018Swedish and foreign listed shares\u2019 refers to equities, depositary receipts, subscription rights, convertible bonds and securities funds that are invested in equity-related instruments, and also those providing stock-index exposure. The shares must be traded regularly on an authorised exchange open to the public, under the supervision of the Swedish Financial Supervisory Authority or a corresponding foreign government agency.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em>Property-related assets<\/em><\/strong> <br>\u2018Property-related assets\u2019 refers to investments in companies that own commercial, residential and special-purpose property (such as police headquarters). Property investments may be made both in companies and in funds. Every investment must entail a clear strategy aimed at a well-diversified property portfolio. Property-related investments are often structured in two parts, shares and loans, but the entire investment is nonetheless classified as a property investment.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Eighty per cent of the investments in this asset class must be in Sweden. This limitation applies to ownership in the property company or property fund concerned and, where applicable, when the investment is divided into a share portion and a loan portion.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em>High-yield interest-bearing securities<\/em><\/strong> <br>\u2018High-yield interest-bearing securities\u2019 refers to interest-bearing assets with low or no credit rating<em>. <\/em>These should preferably be traded regularly on one of the authorised Nordic exchanges (such as Oslo B\u00f8rs and Nasdaq OMX). Exceptions to this principle apply in four situations:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Property transactions, in connection with transactions where the purpose is to acquire property-related assets but the transaction often takes place with shares and loans combined in a single part.<\/li><li>Loans with collateral, when senior loans for properties are issued and the Foundation is offered good collateral in these properties.<\/li><li>Fixed-income funds, in funds that invest in interest-bearing assets where the securities are not necessarily listed on an authorised exchange.<\/li><li>Side investments, when the Foundation may invest in direct loans alongside the fixed-income funds in which it has invested; in doing so, it may invest up to SEK 30 million in a single direct loan.<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">\u2018High-yield interest-bearing securities\u2019 may also refer to preference shares, with a known return, listed for regular trading on one of the Nordic exchanges, and also to fixed-income funds or equivalent that invest in securities, as defined above.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Foundation can invest a maximum of 25% of its assets in high-yield bonds.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em>Hedge funds<\/em><\/strong> <br>\u2018Hedge funds\u2019 are defined as funds with an absolute target return. The purpose of hedge funds is to obtain a risk exposure that deviates from the main strategy. Investments in hedge funds may not exceed 10% of the foundation capital.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Group 2<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Smaller companies<\/strong> <br>\u2018Smaller companies\u2019 refers to unlisted shares and listed holdings where the Foundation\u2019s shareholding is &gt;3%, where the total company value does not exceed SEK 5 billion. Property-related assets are never regarded as \u2018smaller companies\u2019.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Restrictions:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>The Foundation is allowed to invest a maximum of 15% (the proportion at the time when the investment is made) of the foundation capital in this asset class.<\/li><li>In the long term, the Foundation may not have holdings in more than 20 smaller companies.<\/li><li>Ownership of unlisted companies may not exceed 50% in terms of either capital or votes. In exceptional cases, the Foundation may temporarily hold more than 50% of the capital or votes in an unlisted company for a maximum period of 12 months.<\/li><li>The Foundation may not normally invest more than SEK 50 million in a single company. For this to happen, a Board decision is required. An exception to this is when an investment is made in a company or fund that, in turn, invests in a portfolio of unlisted companies. The Foundation may invest a maximum of 5% of its foundation capital in such holdings.<\/li><li>The Foundation may exceptionally be the sole major shareholder in one of the smaller companies.<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Group 3<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em>Liquidity and defensive fixed-income investments<\/em><\/strong> <br>\u2018Interest-bearing investments\u2019 refers to investments in individual securities or funds that yield a known return, and may be classified as:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>cash and cash equivalents<\/li><li>securities issued or guaranteed by the Swedish state<\/li><li>securities issued by Swedish municipalities<\/li><li>securities issued by a Swedish credit institution<\/li><li>securities issued by Swedish housing institutions<\/li><li>securities issued by foreign banks<\/li><li>securities issued by a Swedish public company with a credit rating of BBB (\u2019investment grade\u2019) or better.<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Defensive fixed-income investments also include hedge funds with a risk-and-return structure similar to the defensive fixed-income investments listed above.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em>Other risk limits<\/em><\/strong> <br><em>Counterparties<\/em> <br>Approved counterparties in transactions with the portfolio\u2019s listed assets are:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>securities institutions authorised by the Swedish Financial Supervisory Authority for trading in financial instruments on behalf of clients in accordance with the Swedish Securities Market Act (2007:528).<\/li><li>another Swedish legal person authorised to trade in financial instruments in its own name on behalf of others, or foreign institutions that have similar authorisation.<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Safekeeping<\/em> <br>The portfolio\u2019s assets must be held at a securities institution that is authorised by the Swedish Financial Supervisory Authority to receive securities for safekeeping, and\/or foreign institutions that have corresponding authorisation, in accordance with the Swedish Securities Market Act (2007:528).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Issuer risk<\/em> <br>Financial assets \u2014 shares, bonds, etc. \u2014 attributable to an individual issuer, or to issuers within the same corporate group, may amount to no more than 5% of the foundation capital at the time of investment. The Swedish state and issuers equated with the state, such as Swedish Export Credit Corporation and Kommuninvest of Sweden, are entirely exempt from this restriction. No more than 7% of the Foundation\u2019s assets may be invested in any one of four banks (Nordea, Svenska Handelsbanken, SEB and Swedbank) individually.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Derivatives<\/em> <br>Derivatives may be used for the purpose of obtaining a certain desired exposure, rationalising the Foundation\u2019s investment activities or protecting the Foundation\u2019s assets against exchange-rate and currency risks. Investments in derivative instruments can be made with underlying assets in securities, money-market instruments, financial indices, certificates or foreign currency. Derivative instruments may not be used to construct leverage whereby the security falls more from the nominal value than the underlying asset.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, if the Foundation has acquired a share basket certificate at a nominal value of 100 to replicate the Swedish stock exchange index, the asset may not fall more than the Swedish stock market index. On the other hand, if the certificate has gone up from the nominal value of 100 because of leverage, it may fall to the 100 level with the same leverage.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Currencies<\/em><br>The Foundation must take the currency aspect of asset management into account. If investments are made in foreign securities, the currency risk must be considered and managed through a currency-hedging strategy. The purpose of this strategy is to reduce the possible negative impact that the currency component can have when foreign assets are invested in. The Foundation does not need to currency-hedge each individual asset, but must at all times consider the portfolio\u2019s total currency exposure. The net currency exposure must not exceed SEK 500 million or represent more than 40% of the Foundation portfolio\u2019s currency exposure.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Foundation may not take positions in currencies other than Swedish kronor without this being justified by investments in securities in that particular currency. The Foundation hedges only three currencies: the dollar, euro and pound sterling. The Foundation may use currency futures only as hedging instruments. For cost reasons, the Foundation must strive for contract periods as long as possible, but may hedge currencies for terms of 1\u201312 months.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Stock lending<\/em> <br>This is permitted if it conforms to terms and collateral requirements that are customary in the industry and is expected to contribute to greater returns.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Liquidity risk<\/em> <br>\u2018Liquidity risk\u2019 refers to the risk that a financial instrument cannot be sold without a major discount. The Foundation needs to be able to turn over a certain proportion of its assets at short notice to be able to disburse grants and costs. In view of this, at least 20% of the capital must be invested in assets that can be disposed of within five days at a relevant market price.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>4.3. Review of investment strategy<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In the main, long-term (8\u201310 years) review , comparison is made with the absolute, real return target defined in this document. Moreover, the management is continuously evaluated on the basis of the Foundation\u2019s annual forecast of its assets\u2019 performance, based on the forecast model developed by the Foundation.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The management is also continuously compared with the normal portfolio\u2019s benchmark index, which is compiled by weighting the benchmark indices of the various sub-portfolios according to the benchmark values set by the Board. The sub-portfolios and benchmark indices are as follows:<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>Group 1a (Shares)<\/td><td>  OMX SGI\n  <\/td><td>  40 %\n  <\/td><\/tr><tr><td>Group 1b (Equity-like return and risk)<\/td><td>  CPI + 4,5 %\n  <\/td><td>  40 %\n  <\/td><\/tr><tr><td>Group 2 (Smaller company portfolio)<\/td><td>  CPI + 4,5 %\n  <\/td><td>  10 %\n  <\/td><\/tr><tr><td>Group 3 (Defensive interest-bearing securities)<\/td><td>  OMRX T-bill Index\n  <\/td><td>  10 %\n  <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<hr class=\"wp-block-separator is-style-wide\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">5. Sustainability in asset management<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The assets of the <em>Foundation for Baltic and East European Studies (\u00d6stersj\u00f6tiftelsen)<\/em> are managed in such a way as to limit the risks and make use of the scope for a good return. A key part of achieving this is consideration of ESG (environmental, social and corporate governance) factors in the Foundation\u2019s investments. This limits the financial implications associated with ESG risks, while contributing to sustainability in human society and the environment. The Foundation takes responsibility for sustainability by <em>integrating<\/em> relevant sustainability data into the task of identifying companies that help to make society sustainable; by using impact dialogues to be an <em>active owner<\/em>; and by <em>excluding<\/em> what is not in line with these guidelines.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">These guidelines concern the Foundation\u2019s direct and indirect equity and interest-bearing investments. Appendix 1 shows in more detail how the Foundation intends to work on sustainability issues.<br><br><em>Expectations of corporate behaviour<\/em><br>Expectations of corporate behaviour associated with human rights, labour law, the environment and anti-corruption are set out in established international frameworks, such as the United Nations Global Compact and the OECD Guidelines for Multinational Enterprises. The Foundation seeks to promote compliance with these frameworks and, accordingly, to invest in companies that assume responsibility for the negative environmental or social impact, if any, of their business.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Regarding climate change, the Paris Agreement is the central framework. Its main purpose is to reduce carbon emissions to keep global warming well below 2 \u00b0C, and preferably below 1.5 \u00b0C, between now and 2050. The Foundation strives to invest in companies that adapt their operations in line with the 2 \u00b0C target set out in the Paris Agreement.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Exclusions<\/em><br>The Foundation intends to avoid investments in companies that fail to respect and comply with established standards of corporate behaviour. Moreover, the Foundation does not invest in companies involved in controversial weapons such as anti-personnel mines, cluster munitions, biological weapons, chemical weapons or nuclear weapons. The Foundation also avoids investments in pornography, tobacco and gambling.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Integration<\/em><br>For the Foundation\u2019s equity investments in listed companies, the sustainability criteria described above are integrated, first, on the basis of the Foundation\u2019s climate strategy in accordance with Appendix 1, and second, on an ongoing basis.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For other asset categories, the sustainability perspective is integrated into the investment process as part of the in-depth analysis that precedes investment decisions.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em>Active ownership control<\/em><\/strong><br>Being an active owner is a key part of the Foundation\u2019s work on sustainable asset management. Globally, in cooperation with institutional investors, the Foundation works through an external supplier, to influence certain public companies. In these companies, the Foundation has identified controversies associated with standards for responsible business conduct in the areas of human rights, labour law, environment and anti-corruption.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em>Impact<\/em><\/strong> <br>The Foundation also seeks to make at least one investment annually that actively contributes to sustainable development. It does so by identifying companies with sustainable business missions or financial instruments with a specific impact focus, such as funds or certificates. The purpose is to accelerate the transition to a sustainable society and allocate capital among solutions to sustainability problems.<\/p>\n\n\n\n<hr class=\"wp-block-separator is-style-wide\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">6. Monitoring, reporting and internal control<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The Foundation must continuously monitor its asset management with regard to financial position, portfolio allocation, return targets and compliance with the investment policy.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">6.1. Monthly reporting and monitoring<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">Reporting must be carried out according to the following report plan:<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Internal reports<\/strong><\/td><\/tr><tr><td><strong>Report<\/strong><\/td><td><strong>Frequency<\/strong><\/td><td><strong>Recipients<\/strong><\/td><td><strong>In charge<\/strong><\/td><\/tr><tr><td>Monthly report &#8211; return on and allocation of all asset classes and individual assets, and also the past month\u2019s transactions.<\/td><td>Monthly<\/td><td>Board and investment committee<\/td><td>Investment Director<\/td><\/tr><tr><td>Investment committee\u2019s report &#8211; overall monitoring, incl. return analysis, exposure, forecast follow-up.<\/td><td>Ahead of meetings (normally every 4\u20136 weeks)<\/td><td>Investment committee<\/td><td>Investment Director<\/td><\/tr><tr><td>Board\u2019s report &#8211; macro situation and follow-up of forecasts, monitoring of normal portfolio and monitoring according to the traffic-light model.<\/td><td>Ahead of Board meetings (normally 4\u20135 times\/year)<\/td><td>Board<\/td><td>Investment Director<\/td><\/tr><tr><td>Internal control report &#8211; review of investment policy compliance, investment decisions versus risk limits.<\/td><td>Annually<\/td><td>Board and Investment committee<\/td><td>Investment Director<\/td><\/tr><tr><td>Activity report &#8211; annual follow-up of asset management.<\/td><td>Annually<\/td><td>Board<\/td><td>Investment committee\u00a0<\/td><\/tr><tr><td><strong>External reports<\/strong><\/td><\/tr><tr><td>Annual report<\/td><td>Annually<\/td><td>Government<\/td><td>Board<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">In addition to the above fixed reports, the Investment Director must continuously monitor the Foundation\u2019s asset management.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">6.2. Internal control<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">Once a year, a review  of the Foundation\u2019s asset management must be carried out by an external party. The purpose of this review  is to ensure that the asset management follows the investment policy regarding, for example, risk limits, decision-making processes and reporting routines.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">6.3. The Foundation\u2019s forecasting model<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">Annually, the Foundation forecasts the anticipated performance of its assets (with three different scenarios) five years into the future. This is continuously tracked against actual performance and forms the basis of the Foundation\u2019s overall investment decisions. On an annual basis, this must be updated with regard to changes in the Foundation\u2019s various assets, total capital and assumptions about changed prospects.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">6.4. Traffic-light model, currency and stock exposures<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">The Foundation measures exposure to various financial risks in the portfolio using the Swedish Financial Supervisory Authority\u2019s traffic-light model. The monthly reports submitted to the Board therefore account for:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>buffer capital \u2014 that is, market-valued assets minus the foundation capital in relation to the foundation capital<\/li><\/ul>\n\n\n\n<ul class=\"wp-block-list\"><li>total stock exposure at each reporting date, taking into account any leverage in the various financial instruments owned by the Foundation<\/li><\/ul>\n\n\n\n<ul class=\"wp-block-list\"><li>total currency exposure at every reporting date in relation to underlying assets in the exposed currency.<\/li><\/ul>\n\n\n\n<hr class=\"wp-block-separator is-style-wide\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">7. Measures in the event of sudden loss of expertise in asset management<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Since the Foundation has a small operational organisation for asset management, there is an operational risk to manage. The current rules of procedure are as follows:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>The investment committee makes all the decisions on purchases and sales, and other decisions affecting the Foundation\u2019s holdings of shares and share-related instruments. It also makes all investment decisions affecting the size of the interest-bearing portfolio. Exceptions to this rule are stated in section 4 in this document, \u2018Responsibilities and powers\u2019.<\/li><li>The investment committee notifies the Swedish Legal, Financial and Administrative Services Agency of its decisions, and the Agency executes all decisions, payments and settlements and, in doing so, attends to all practical details and all contact with brokers, broker-dealers and banks.<\/li><li>The Agency handles all accounting and drafts the figures for the annual accounts. <\/li><li>At the end of each month, the Agency prepares a detailed report on the status and performance of its assets.<\/li><li>The Foundation has an Investment Director, who is in charge of liaising between the investment committee and the Agency; prepares the committee meetings; reports to the Board; and drafts the textual content of annual accounts for the asset management. The Foundation also has two deputy investment directors whose primary responsibility is for unlisted companies, but who have the skills profile required to carry out the Director\u2019s duties.<\/li><li>More or less daily, the Director monitors the performance of the Foundation\u2019s equity portfolios, using Bloomberg\u2019s databases and analytical instruments. The Director performs the more comprehensive, in-depth analyses that form the basis of the committee\u2019s decision to invest in new equity portfolios and carry out major restructuring of existing portfolios. The Director also handles analysis and negotiation of the more complex investment instruments, such as the share-related certificates. All the material is managed by means of secure back-up at S\u00f6dert\u00f6rn University.<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>In the event of a sudden loss of skills:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>If the Investment Director or one of the deputies for the same leaves the Foundation\u2019s employ, the remaining person has the skills to manage the entire asset management assignment in the short term. In the event of a sudden loss of both the Director and a deputy, the following decisions are required.<\/li><li>The Swedish Legal, Financial and Administrative Services Agency is assigned by the Board\u2019s Chair to make the ongoing decisions that are necessary, in the Agency\u2019s judgement, such as participation in new issues, splits and the like.<\/li><li>Until the Board has been convened, no unforced decisions on purchases and sales should be made. The investment strategy is not of such a nature as to require prompt decisions concerning the total portfolio.<\/li><li>As soon as possible, the Board should make a decision on the asset management, to apply until further notice. There are three primary options:  <br>a. To supplement the committee with one person, appoint a new Investment Director  or deputy to the same and then continue as usual until new arrangements, if any, are introduced.  <br>b. To task the Legal, Financial and Administrative Services Agency to carry out the management until further notice, with the same guidelines as those the Investment Director or deputy investment director(s) had.  <br>c. Not to make any unforced purchases and sales until new arrangement have been introduced. <\/li><li>The incoming Investment Director, or another suitable person appointed by the Board, heads the task of preparing documentation for decisions on how to organise asset management in the long term.<\/li><\/ul>\n\n\n\n<hr class=\"wp-block-separator is-style-wide\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">8. Revision of the investment policy<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">This document must be revised annually and subsequently approved by the Board. However, the Board is entitled at any time to approve deviations from the provisions in the investment policy.<\/p>\n\n\n\n<hr class=\"wp-block-separator is-style-wide\"\/>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h1 class=\"wp-block-heading\">GLOSSARY<\/h1>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>ALM study<\/strong> <br>\u2018ALM\u2019 stands for Asset Liability Management and is a study aimed at ascertaining that asset management can meet both short-term and long-term payment commitments, while also providing the highest possible return on capital.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Asset classes<\/strong> <br>Interest-bearing securities and equities are two examples of asset classes.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Basket certificate<\/strong> <br>A financial product based on an underlying basket of stocks. The value of the certificate depends on the performance of the stocks in the basket.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Bond<\/strong> <br>A promissory note with a time to maturity of (originally) more than one year.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Convertible debt instruments<\/strong> <br>Promissory notes issued limited companies that entitle their holders to completely exchange their claim for shares in the companies concerned.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Currency risk<\/strong> <br>This is the risk of assets listed in a foreign currency falling in value, as measured in the rise in the investor\u2019s own currency relative to the fall in the foreign currency.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Derivative instruments (derivatives)<\/strong> <br>A derivative instrument is a security whose value depends on an underlying asset such as equities, bonds, interest rates, indices and currencies. The most common derivatives are futures and options.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Diversification<\/strong> <br>Diversification is a fundamental concept in modern portfolio theory. It is based on the fact that, when two assets are combined, the total risk is less than the sum of the risks in each of the individual assets separately. By investing capital in several different assets and placing them with managers who have differing management styles, diversification \u2014 that is, risk diversification \u2014 is achieved.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Duration<\/strong> <br>Duration may be described as the interest-bearing portfolio\u2019s weighted average remaining time to maturity. The duration is determined by the remaining maturity of the bonds and coupons, the size of the coupons and the level of interest rates. The higher its value, the more sensitive the portfolio is to changes in the market interest rate. The duration of a \u2018zero-coupon bond\u2019 is equal to its time to maturity, and for a coupon bond the duration is shorter than its time to maturity.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Exposure<\/strong> <br>The value, expressed in kronor or as a percentage of the total portfolio, that changes as a result of changes in the price of, or interest rate on, a security.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Futures contract<\/strong> <br>A mutually binding agreement between two parties on the purchase and sale of a certain quantity of a commodity, with settlement on an agreed future date. Examples are stock, interest-rate and index futures.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Hedge fund<\/strong> <br>A collective term for many different types of asset management styles, with some common features: absolute return targets, low correlation with traditional assets (equities and interest-bearing securities) and very broad, unconventional investment rules (loans, derivatives, short positions). Hedge funds contribute to portfolio diversification.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Index, benchmark index<\/strong> <br>Measures the value of a market or submarket. Examples: the SIX Portfolio Return Index (Swedish equities) and the OMRX Total Bond Index (Swedish nominal interest rates).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Issuer<\/strong> <br>An issuer makes new shares or other securities available.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Liquid assets<\/strong> <br>Liquid assets are defined as cash, cash equivalents, balances in custody and other bank accounts, daily deposits, special deposits and the kinds of short-term fixed-income securities that have been acquired to constitute a liquid investment.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Liquidity<\/strong> <br>Measures the extent of trading, or volume of transactions, in an instrument or market. The term is also used for cash.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Rating, rating categories<\/strong> <br>A credit rating is a relative assessment of an issuer\u2019s ability to meet its payment obligations on time. As a rule, a rating refers to a given loan programme or other particular debt obligation, and is an estimate of the borrower\u2019s ability to repay securities issued in the programme at the correct time. However, a rating may also refer to a particular issuer\u2019s ability to fulfil all its payment obligations. Internationally, ratings are set by institutions such as Moody\u2019s and Standard &amp; Poor\u2019s.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Strategic allocation<\/strong> <br>Long-term distribution among asset classes, specified by investors. It seldom changes.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Tactical allocation<\/strong> <br>Short-term distribution among asset classes. Utilised within defined limits in relation to the strategic allocation. Changes frequently.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Adopted by the Board of the Foundation on 4 June 2020. 1. Guidelines for the&#8230;<\/p>\n","protected":false},"author":2,"featured_media":0,"parent":1837,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_acf_changed":false,"footnotes":""},"class_list":["post-1708","page","type-page","status-publish","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/dev.ostersjostiftelsen.se\/en\/wp-json\/wp\/v2\/pages\/1708","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dev.ostersjostiftelsen.se\/en\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/dev.ostersjostiftelsen.se\/en\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/dev.ostersjostiftelsen.se\/en\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/dev.ostersjostiftelsen.se\/en\/wp-json\/wp\/v2\/comments?post=1708"}],"version-history":[{"count":18,"href":"https:\/\/dev.ostersjostiftelsen.se\/en\/wp-json\/wp\/v2\/pages\/1708\/revisions"}],"predecessor-version":[{"id":2071,"href":"https:\/\/dev.ostersjostiftelsen.se\/en\/wp-json\/wp\/v2\/pages\/1708\/revisions\/2071"}],"up":[{"embeddable":true,"href":"https:\/\/dev.ostersjostiftelsen.se\/en\/wp-json\/wp\/v2\/pages\/1837"}],"wp:attachment":[{"href":"https:\/\/dev.ostersjostiftelsen.se\/en\/wp-json\/wp\/v2\/media?parent=1708"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}